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Learn about Cosmos Hub Staking
To earn a yield on your ATOM, you can either lend them out to custodial providers or via a Defi lending protocol, run your own Validator or delegate your tokens to validators of your choice.
We recommend using a Ledger Hardware Wallet to keep full control over your funds. To delegate your tokens, you should ensure you have your ATOM on your Ledger wallet and follow the steps below:
Step 1: Go to the Keplr Staking Dashboard, connect your Ledger and select Cosmos Hub on the left panel.
Step 2: Select a validator from the table. If you are unsure which validator to delegate to, refer to our FAQ on choosing a validator for guidance.
Step 3: Once you have chosen a validator and decided on the number of tokens you would like to stake, click ‘Stake’ and input your desired token amount.
Step 4: Finalize by clicking stake and confirming the transaction in your wallet.
Once you have delegated your $ATOM, there are things you need to consider going forward.
- Firstly, delegating from one validator to another can be done without waiting for the unbonding period. You might consider redelegating if your current validator raises their commission rate or gets jailed for misbehaviour on-chain. Once redelegated, you have to wait for 21 days before you are able to redelegate again.
- Secondly, rewards are not auto-compounded. To get the most out of your tokens, you should consider claiming and staking your rewards more frequently, but consider that each transaction will cost you some gas. By using our Cosmos staking calculator, you can calculate the optimal re-stake frequency for your amount of ATOM. Some tools, such as restake.app, will enable you to pick a validator who will auto-compound your rewards for you, so keep this in mind.
- Lastly, as a participant in the Cosmos Ecosystem, once you have staked your tokens, you can vote on Governance Proposals. While your contribution and vote are highly valuable to the ecosystem, participating does not affect the sum of your rewards.
By delegating to a good long-term oriented validator, you can reduce most of your maintenance and only have to check back to restake your rewards.
It is essential for users to stake their PoS tokens with dependable and highly performant validators, which is why we have rolled out our Staking Rewards Verified Staking Provider (VSP) Program in June 2022. Through this program, we thoroughly scrutinize potential validators, evaluating factors such as security measures, their on-chain reliability, their provider setup, and value-added services for the whole ecosystem.
Our VSP documentation contains further details about the program, Staking Providers that are part of the VSP will have a blue checkmark displayed next to their names here. If you want to know which validators on Cosmos are part of the VSP, simply go to the validator page on Minstcan and click on a validator’s name. If that validator is a verified provider, it will have the Staking Rewards logo shown under ‘Additional information’.
There are many metrics to consider when selecting a validator to delegate to:
Commission Rates: The commission rate a validator charges is the % of your reward that the validator keeps for themselves. A high commission rate means your rewards will be lower, whilst a low commission rate could mean that the validator is not profitable and could cause issues for them in the future. Keep in mind that validators can adjust their commission rates up or down over time.
Number of Users: A high number of delegators could indicate positive sentiment towards a validator.
Validators Self-Staked balance: A provider with a high amount of staked tokens likely has more incentive to continue operating their services as they have more to lose than those with low self-staked balances. This metric has some limitations as Validators can choose to delegate to their own validator from another wallet, which is done to increase security of their funds.
Current Status: To check if a validator is currently active, go to the Validator Dashboard on Mintscan. The default view on this page is for “Active” validators, but you can also filter to view inactive validators in the top right corner of the page. Keep in mind that only the top 175 validators on Cosmos, ranked by balance, receive rewards.
Network Share: You typically don’t want to choose a validator with the highest or a low network share. Delegating to the most popular validators increases centralisation risks within the network as those validators will have more say in governance and produce a larger share of the blocks. A validator with a low network share might not be profitable, increasing the risk of them discontinuing their services. If a validator drops out of the top 175, they also stop earning rewards. However, if you are willing to put more time in, then delegating to a smaller validator helps support the decentralization of the network. You would just have to make sure to check regularly if the provider is still active and operating.
Performance: Make sure you pick a validator with the highest possible performance. Further, please check individual validators’ uptime, and our recommendation is only to pick those with a >=99% uptime and a long history of not getting slashed.
Value Add to the Ecosystem: Some providers offer extra services to their delegators, such as tax reporting tools or explorers. This can be another great way to filter for validators that are long-term invested in the Cosmos Ecosystem. By delegating to a validator that is strongly dedicated to the Cosmos Ecosystem, you are supporting their development that indirectly impacts the value of your ATOM investment beyond the rewards from staking.
Native staking rewards for ATOM are composed of:
Block Rewards: Cosmos has on-chain parameters which dictate how many tokens are minted as rewards for every block. The parameters on-chain are Annual Issuance which is the expected number of tokens minted per year and expected block time, which gives us the expected number of blocks per year. The inflation rate increases by 13% per annum until 20% if there is less than 66% of all ATOM staked, and if there is more than 66% staked then the inflation rate will decrease at a pace of 13% p.a down to 7%.
Realized Block Time: Whilst there are on-chain parameters which guide us on how long each block should take, in practice, this can differ depending on the market circumstance. We average out the block time over the last 30 days and adjust the expected total annual payout accordingly. If blocks are produced faster, then the annual rewards are higher.
Transaction Fees: Each transaction processed by the network comes with transaction fees. Transaction fees are collected by the network and distributed to each delegator proportional to their stake. The Staking APR will vary with network usage. The APR will increase as the network gets more traction and more transactions occur on Cosmos Hub. If your validator gets lucky and only produces high-fee blocks, your reward rate will be higher than one who proposes blocks with lower fees.
Please note that the total annual rewards are divided by all active stakers; hence, as the amount of staked tokens goes up, the reward rate goes down.
Also, with ATOM 2.0 potentially around the corner, there is some uncertainty about the future inflation rate. More utility for ATOM could see transaction volume increase, so it is difficult to predict the reward rate over the next few years. Besides ATOM 2.0, there are governance proposals coming in to adjust some of the on-chain parameters, which could alter the APR if they go through.
You are welcome to play around with our Cosmos Staking Calculator to get a better feel of how these metrics can influence your rewards.
Whilst we want to ensure staking is as safe and transparent as possible, there are still things to consider regarding whether a specific staking option is right for you.
Slashing risk: ATOM delegated to a validator can be partially slashed if the validator misbehaves. On top of getting slashed, a validator can also be jailed, during which time you will not be earning any rewards. You can get slashed up to 5% for double signing events.
Unbonding risk: The unbonding period for ATOM is 21 days. Crypto markets are highly volatile, and investors need to be aware that they cannot sell their tokens immediately once they have staked them. They first need to wait 21 days for the tokens to unbond before they become liquid. Please take note of this lockup before you decide to stake. Consider keeping funds liquid if you do not intend to hold ATOM long-term.
Dropping out of the active set: On top of potentially losing out on rewards if your validator gets slashed, a validator could also drop out of the top 175, meaning they no longer earn any rewards. Ensure you check back frequently to ensure your validator is active, not jailed and has not raised their commission fees.
Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs. This not only applies to staking but your ATOM investment in general.
Please note that this is not an exhaustive list of all the risks related to staking.
ATOM is the native token of the Cosmos network that is used to carry out the key functions of the platform as detailed below:
- Gas token: Each transaction processed by the network requires a small fee to be paid to the validator.
- Governance: ATOM is used to vote on governance proposals on the network. Only staked tokens are eligible to be used for governance voting. The amount of voting power is measured in terms of stake. Unlike many other networks, as a delegator, you are also able to participate directly in governance, rather than passing your votes to the validator.
- Staking: Users can temporarily lock ATOM up to contribute to the security of the Cosmos Hub.
Cosmos Hub is powered by Tendermint BFT. Tendermint BFT is a Byzantine Fault Tolerant (BFT) consensus engine developed by Tendermint. It offers instant finality, is horizontally scalable and is secure against malicious actors. It is also open-source, meaning anyone can inspect and use the code. Additionally, it is simple to set up and use, allowing developers to quickly and easily build distributed applications. The active validator set consists of the 175 highest-ranked validators by staked tokens, from which 1 validator is randomly selected to propose a block with 66% of the remaining active validators being required to attest the block in order for it to become final. The higher the stake, the more likely they are to be selected.
Unlike many other networks, there is no supply cap for ATOM currently. At current network parameters, the ATOM supply is expected to expand indefinitely. The inflation rate of the network depends on the on-chain parameters as well as the realised block time. With ATOM 2.0 potentially around the corner, keep an eye on any news, as this could drastically impact the future supply of ATOM.
Initial token distribution
The Initial token distribution of ATOM is as follows:
- 7.1% is allocated to Strategic and early adopters
- 5% is allocated to Seed Investors
- 67.9% is allocated to Tendermint Inc.
- 10% is allocated to Future Sales
- 10% is allocated to the Interchain Foundation
The Interchain Foundation conducted multiple private investment rounds and held a public fundraiser event that concluded on April 6, 2017. The foundation allocated the minted ATOMs to four groups: Private Contributors, Public Contributors, All in Bits Inc (AiB), and the Interchain Foundation (ICF).
- $1,329,472 was raised in the strategic round with an average price of $0.08
- $300 000 was raised in the seed round with an average price of $0.025
- $16,029,305 was raised in the public round with an average price of $0.1
- All in Bits Inc (Tendermint Inc.) received 10% of the initial supply equivalent to 23,619,895.81 ATOMs for developing the open-source IP that is used in Cosmos Network.
- ICF received 10% of the initial supply equivalent to 23,619,895.81 to pursue their R&D activities for Web 3.0.